CURRENCY REPORT

Press, 18 October 1976, Page 24

CURRENCY REPORT

The following is the diary kept by the foreign exchange dspartment of the Bank of New South Wales during last week:— October 7: The Bank of England decision to raise the minimum lending rate to a record 15 per cent (from 13 per cent) caused immediate marking up of domestic interest rates, and sterling rose sharply to $1.6740, but dropped almost as quickly to $1.6650, then fluctuated widely. The pound closed 1.2 c up on the day, closing at $1.6650 with sterling’s depreciation rate contracting to 44.6 per cent. The French franc came under pressure in response to national strike by France’s three major unions.

October 8: Sterling closed at $1.6625 after quiet trading, underpinned by higher British interest rates including increases in banking base rates. European currencies were little changed. The yen weakened considerably, with Japanese bankers in London claiming the medium term outlook is for a slightly weaker yen influenced by fears of a 10 per cent oil price rise and signs of rising imports. In the short term, however, the yen will move in line with the Deutschemark.

October 11: In light trading the pound closed at $1.6595, restrained by release of data showing a strong (1.25 per cent) rise in the U.K. September wholesale price index. The U.S. dollar gained lightly against the mark, Swiss and French francs, assisted by fading of speculation about a possible European joint float realignment.

October 12: Sterling closed at $1.6530 with indications of some small Bank of England support at the $1.6515 level during afternoon trading. Sterling was depressed by the reported 1 per cent fall in the U.K. August industrial production index, although the market is more concerned over future inflation and money supply trends. The French franc weakened against the U.S. dollar, as operators moved out of francs into marks and Swiss francs, with both the mark and the Swiss franc closing firmer against the U.S. dollar.

October 13: Sterling was relatively stable ahead of U.K. September trade data. The French franc encountered fresh pressure, moving across

the five francs level in terms of the U.S. dollar, as large corporations sold francs to hedge against current French political and economic uncertainties. The weakness of the French franc spilled over into the lira which retreated against the U.S. dollar. The mark again moved to the upper intervention point of the European joint float.

October 15: Sterling fell in opening thin trading on the London foreign exchange market. It was quoted at $1.6360 after closing the night before at $1.6400; but dealers said the market appeared to be “steady." The Bank of England’s depreciation rate against 10 major currencies since December, 1971, widened to its recordequalling 45.7 per cent at the opening, from 45.6 per cent overnight.